Aurelia Butler

Investing.com — Europe stepped up its preparations for a winter without Russian energy supplies on Wednesday, proposing price caps and demand suppression for electricity, along with a price cap on imports of Russian natural gas. Speaking two days ahead of a meeting of EU energy ministers, European Commission President Ursula von der Leyen laid out five proposals to address the looming crisis. The proposals, which will need the approval of the EU’s member states to take effect are: 1. A mandatory target for cutting electricity demand at peak hours, which typically generate the highest prices. 2. A cap on revenues for non-fossil fuel power generators, restricting the scope of renewable generators and hydropower companies to make excess profits as ‘price-takers’ on a wholesale market where reference prices are usually set by the price of gas-powered electricity. 3. A “solidarity contribution” (in other words, windfall taxes) levied on the excess profits of fossil fuel companies. 4. Liquidity support for participants in the bloc’s power markets, who have been hit with a massive rise in collateral requirements as the price of their future buying commitments has exploded. This will include a temporary relaxation of the EU’s state aid rules. 5. A cap on the price of natural gas imports from Russia. “The objective here is very clear,” von der Leyen said. “We must cut Russia’s revenues which Putin uses to finance this atrocious war against Ukraine.”The measures represent another escalation in the ‘energy war’ between Russia and Europe that was triggered by Russia’s invasion of Ukraine in February. They come only days after G-7 ministers agreed to impose a price cap on Russian oil exports, trusting to western dominance of maritime insurance markets to enforce it. Russia had suspended all shipments of natural gas to Germany through the Nord Stream pipeline as a result, raising the likelihood that Europe will have to get through the coming winter without any supplies of Russian gas.Russian President Vladimir Putin raised the stakes again earlier on Wednesday, telling a conference in Vladivostok in Russia’s Far East that the country would not supply any fuel of any sort to Europe if it tried to impose a price cap on its gas exports. “Will there be any political decisions that contradict the contracts? Yes, we just won’t fulfil them. We will not supply anything at all if it contradicts our interests,” Reuters quoted Putin as saying. “We will not supply gas, oil, coal, heating oil – we will not supply anything.” Europe usually imports about 40% of its gas and 30% of its oil from Russia.Von der Leyen noted that the small amounts of Russian gas still reaching the EU, chiefly through the Yamal-Europe pipeline, represent only 9% of current imports. The bloc has also made better progress than first seemed likely in filling its storage facilities ahead of the peak winter demand season. According to data from Gas Infrastructure Europe, they are now 82% full, having reached the Commission’s 80% target almost two months ahead of schedule.  More

Globally, passenger traffic in July was at about 75% of pre-pandemic levels, helped by strong demand for domestic services where traffic had recovered 86.9% of the level seen in July 2019, the body said.International traffic, however, had recovered 67.9% of the pre-pandemic levels in July, lagging behind domestic demand.International Air Transport Association (IATA) Director General Willie Walsh, on a call with reporters, described it as a “solid recovery”, helped by demand in the northern hemisphere over the summer and increased domestic activity in China.However, Walsh warned that high jet fuel prices would continue to put pressure on airlines’ cost base for the rest of the year, which he described as a challenge for carriers.”I am aware of some airlines that have embarked on hedging in recent months … just to provide themselves with some protection against the volatility that we’re witnessing,” he said. More

LONDON (Reuters) -Britain’s surging inflation could slow if new Prime Minister Liz Truss helps households and businesses cope with rocketing energy costs, but it is too soon to say what that will mean for interest rates, the BoE’s chief economist said.The central bank has sped up its pace of increases in borrowing costs in a bid to limit the damage to the world’s fifth-biggest economy from a leap in inflation above 10%, even though it expects a recession to start later this year. The BoE forecast in August that inflation would exceed 13%, and some economists have said it could top 20% if gas prices – pushed up by Russia’s invasion of Ukraine – stay high.However, the picture will change if Truss goes ahead with reported plans to cap energy household energy bills and offer support to businesses, BoE chief economist Huw Pill told lawmakers on Wednesday.While the subsidies for households could add to demand and create more inflation pressure, “net-net on the implications for headline inflation in the short term, I would expect that to see a decline,” Pill said.Truss moved into Downing Street on Tuesday, promising to help Britain through its gas price shock. She is due to announce details of her plans on Thursday.Pill said the implications for monetary policy remained unclear, but added that the BoE would ensure government spending did not generate inflation.Economists have said an energy price cap could mean inflation has peaked, though longer-term it might add to price pressures if there is a levy on future bills to compensate energy giants for their losses.BOND MARKET TURMOILBoE Governor Andrew Bailey, also speaking to parliament’s Treasury Committee, said Truss’s impending announcement would provide useful clarity to markets.British government bond prices have slumped on worries about the scale of borrowing needed to fund Truss’ cost-of-living support plans and the tax cuts she has promised, pushing 10-year British government bond yields to their highest since 2011. “It’s important that there is a clear way forward on policy … That will be important for markets to understand what is going to happen.” Deutsche Bank (ETR:DBKGn) said on Wednesday that the energy price support and tax cuts planned by Truss could cost 179 billion pounds ($205 billion), about half Britain’s historic pandemic spending push.New finance minister Kwasi Kwarteng told bankers and investors that borrowing would rise in the short term but he would ensure fiscal discipline in the medium term.Bailey said the comments by BoE officials on Wednesday should not be read as a signal about what the central bank would do on interest rates next week. Investors scaled back their bets on an outsize 75-basis-point increase on Sept. 15 to around 56%.Investors are pricing in the BoE raising rates to at least 4.25% by the middle of 2023, up from 1.75% now, although most economists have said they think it will peak at a lower level, given the likelihood of a recession starting later this year.The last time the central bank raised rates by at least 75 basis points was in 1989, excluding an attempt to shore up the pound in 1992 which was reversed in less than a day.Bailey rejected a suggestion that over-aggressive rate rises by the BoE were adding to the headwinds facing Britain.”The person who is going to put this economy into recession is Vladimir Putin not the MPC,” he said.Bailey was asked about another promise made by Truss: a review of the mandate of the BoE, which is tasked with aiming for 2% inflation.He said moving to a money supply target would not be sensible and a nominal gross domestic product target would not be an obvious improvement.($1 = 0.8750 pounds) More

Prime Minister Liz Truss said she would set out her plan Thursday to help UK households and business facing soaring energy bills, as she ruled out funding the support package with a windfall tax on companies.In her first Prime Minister’s Questions session in Parliament since formally taking office on Tuesday, Truss underlined her smaller-state, tax-cutting ambitions and warned that Britain could not “tax our way to growth.”But she faced criticism from Keir Starmer, leader of the opposition Labour party, who warned she had made a “political choice” in allowing energy firms to make excess profits while working people would “foot the bill for decades.”Truss vowed to keep corporation tax low in order to attract more businesses to invest in the UK, and said she wanted to ensure the UK used more of its own energy supplies including oil and gas from the North Sea.#PMQsTruss responds: “I believe it is the wrong thing to be putting companies off investing in the UK” — Bloomberg UK (@BloombergUK) September 7, 2022Her government is planning on capping average annual household energy bills at or below the current level of £1,971, Bloomberg reported Monday. The move would prevent household bills from jumping 80% in October, after regulator Ofgem said the price cap would rise to an average annual rate of £3,548.Truss and Chancellor of the Exchequer Kwasi Kwarteng are also finalizing plans for a £40 billion package to lower energy bills for businesses.©2022 Bloomberg L.P. More